Question

To compare the $1-an-hour your grandfather earned in 1950 with the $8-an-hour you earn today, you would need to: Question 35 options:

a) simply compare $1-an-hour to $8-an-hour.
b) add the inflation rates in each year since 1950 until today and add this to your grandfather's wage.
c) calculate real wages in both 1950 and today.
d) calculate your grandfather's nominal wage in 1950 and compare it to your wage today.

Answer 1

c) calculate real wages in both 1950 and today.

Real wage is income expressed in terms of purchasing power, which means that it is inflation adjusted for eg what $1 could buy in 1950 compared to what $1 can buy today. So when we find the real wages of today and 1950 we can compare the purchasing power of both the wages and then compare them.

Step-by-step explanation: